Two Sides Rally to Shape Social Security Discussion
By: Richard W. Stevenson
But before he addresses them, Mr. O'Neill will get a firsthand look at how explosive an issue Social Security remains and how rapidly the two sides in the debate over personal investment accounts are mobilizing.
When he arrives for the luncheon speech at the World Trade Center, Mr. O'Neill will be met by protesters organized by the A.F.L.-C.I.O. and a coalition of liberal groups.
They say they intend to criticize Mr. Bush's approach as dangerous to the retirement security of millions of workers. Moreover, the groups say, they will attack Mr. O'Neill for encouraging investment firms — which stand to profit from the creation of the personal accounts — to build support among lawmakers and the public for Mr. Bush's approach. His speech to the business group is all the more questionable, they say, since regulatory and policy decisions by the Treasury Department can have a substantial influence on securities firms.
"The idea that he's going to New York to raise money to lecture the American people through advertising on the need to dismantle Social Security is an outrageous use of his time and an outrageous use of the federal government," said Roger Hickey, co-director of Campaign for America's Future, one of the groups organizing the protest.
The business group Mr. O'Neill is addressing, a newly formed organization called the Coalition for American Financial Security, says the event is not a fund-raiser. The coalition's spokesman says it has no plans for an advertising campaign.
The coalition was founded by executives from the Frank Russell Company, an investment firm based in Tacoma, Wash., that is best known as the creator of the Russell 2000 stock index. Its members include executives from investment firms, including State Street Global Advisors, Mellon Institutional Asset Management and Brinson Partners.
Among the companies that will be represented as guests at Mr. O'Neill's luncheon speech are Morgan Stanley, American International Group, American Skandia and Caterpillar. Also attending will be representatives of the Financial Services Forum, an alliance of companies in the investment business.
"We basically put out an invite to folks who want to learn more," said T. J. Petrizzo, spokesman for the business coalition. "No money's being raised. No envelopes are being exchanged."
Treasury Department officials said that Mr. O'Neill was simply taking an opportunity to discuss an issue that was high on the administration's agenda, and that he regularly spoke to groups with a broad array of perspectives on the issue.
"The secretary will accept every speaking invitation to highlight the need to fix the system now," said Michele A. Davis, Mr. O'Neill's spokeswoman.
It will be months at least before Mr. Bush settles on details of his proposal to allow workers a chance to invest part of their Social Security payroll taxes in stocks and bonds. Congress is unlikely to take up the issue before next year.
But as the maneuvering around Mr. O'Neill's appearance in New York suggests, the economic and political stakes are high, and both sides in the debate plan to be aggressive from the start.
In Virginia, Democrats are using a race for an open seat in the House to test advertising that criticizes Republicans for privatizing Social Security, and Democratic strategists say the commercials have been effective. Democrats say that any alliance between Wall Street and the administration on Social Security would give them new ammunition in their effort to portray Mr. Bush as a lackey of moneyed special interests.
Union officials, who have made fighting Mr. Bush's Social Security plan one of their main priorities, are threatening to boycott investment firms that actively promote the creation of private investment accounts.
Among Mr. Bush's allies, a variety of groups are formulating plans to push their side of the story to lawmakers and the public.
Supporters of private accounts recently formed the Universal Savers Alliance, a group that intends to build grass-roots support for the idea, in part by tapping into a network of activists who were involved in advocating term limits for politicians.
The Alliance for Worker Retirement Security, which is backed by the National Association of Manufacturers and other business groups, is hiring new staff members as it prepares to gear up its lobbying and public education efforts. This year it lost its director, Charles P. Blahous, to the White House, where he is staff director for the commission Mr. Bush appointed to come up with a specific plan for creating personal accounts.
Now some investment firms seem increasingly willing to enter the battle. Their participation in the debate could provide a well-heeled source of support for Mr. Bush. But it is also raising questions about whether their involvement is driven by a desire to cash in on the possible establishment of more than 100 million investment accounts, all of which would presumably be administered by Wall Street firms for a fee.
It is impossible to say how much is at stake for Wall Street because no one yet knows how a system of private accounts would work or how much money would flow into them. Opponents of personal accounts say they could generate billions of dollars a year — perhaps even tens of billions of dollars a year — in fees and commissions for investment firms.
As the debate over private accounts has developed over the last few years, investment companies have remained mostly on the sidelines, in part out of concern that they would become lightning rods for critics of changing Social Security. More than most industries, financial services companies have always sought to maintain good relationships on both sides of the aisle. In the last election cycle, securities and investment firms donated more than $90 million to candidates, the third-highest total of any industry, and 45 percent went to Democrats.
But a number of Wall Street and other financial services executives have been strong advocates of including personal accounts in any overhaul of Social Security. Among them are Donald B. Marron, the chairman of PaineWebber Inc.; William Shipman, a principal at State Street Global Advisors; and Wade Dokken, chief executive at American Skandia.Mr. Petrizzo said reports that the business coalitions planned to raise $20 million to finance an advertising campaign to build support for personal accounts were unfounded. He said the Coalition for American Financial Security had been meeting with members of Congress, getting its Web site up and running and planning a series of public forums around the country. The question of advertising "hasn't been addressed yet," he said.
The group's primary goal, Mr. Petrizzo said, is "to help educate people that the current system is unsustainable." While its Web site does not specifically endorse any particular approach to Social Security reform, it is clearly sympathetic to proponents of personal accounts, praising Mr. Bush and offering a refutation of criticisms of privatization.
Advocates of personal accounts said they expected their grass-roots and advertising efforts to be substantial, if only to avoid leaving the field free to organized labor and other opponents.
"You can't just hold back and let the other guys shoot," said Michael Tanner, the head of the Social Security privatization program at the Cato Institute, a libertarian research group.
Opponents of personal accounts said they had no doubt that investment firms and big corporations would throw their money and their clout behind Mr. Bush. Expecting to be outspent by business in the campaign to win over public opinion, they said they would fight back in every way they could.
Richard Trumka, secretary-treasurer of the A.F.L.-C.I.O., said he would urge union members and the trustees of union pension funds, in the United States and abroad, to stop doing business with any investment firm that works to promote the creation of personal Social Security accounts.
Managing the pension funds for unionized work forces is among the biggest and most competitive sectors of the investment business.
"They can't make money off us and then use the money they make off us to undermine our retirement security in the future," Mr. Trumka said.
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